Nobel winner cites work of collaborator, Amos Tversky

BY
LISA TREI

Daniel Kahneman, a psychology professor at Princeton who
shared this year's Nobel Memorial Prize in Economic Sciences with
Vernon Smith of George Mason University, did his award-winning
research with Amos Tversky, a Stanford psychology professor who
died in 1996.

"The prize ... is quite explicitly for joint work, but
unfortunately there is no posthumous prize," Kahneman told
Stanford Report.

Kahneman is the second psychologist to win economics' highest
award. The Nobel Foundation commended him "for having integrated
insights from psychological research into economic science,
especially concerning human judgment and decision-making under
uncertainty."

Working with Tversky, Kahneman pioneered the field of
behavioral economics. In developing their so-called "prospect
theory," the psychologists argued that people are not as
calculating as economic models assume. Instead, they said, people
repeatedly make errors in judgment that can be predicted and
categorized. A 1979 paper they wrote on the subject in
Econometrica is one of the most widely cited papers in
economics.

Tversky's widow, Barbara, a Stanford psychology professor,
said her husband and Kahneman started working together at Hebrew
University in the late 1960s. "It continued throughout their
lifetime," she said. "It was an amazing synergistic collaboration.
They spent hours talking on the phone every week. They were either
in my living room or [Kahneman's] living room. They wrote every
word together. It was a real intellectual high to watch
them."

Barbara Tversky said the work of the two Israeli-born
psychologists "shook the foundation of economics" because it called
into question the assumption of a "homo œconomicus" motivated
by self-interest and capable of rational decision-making. "It
spawned a new field of economics," she said. The study of law,
statistics, political science and philosophy also have been
influenced by the two men's work, she added.

Kenneth Arrow, economics professor emeritus, said many
economists at first rejected the psychologists' ideas. "They said,
'These are experiments -- what do they have to do with real life?'"
he said. However, Arrow continued, how human behavior affects the
stock market has shown the work to be both useful and correct. "It
is very, very important in the field," he said. "How it's fully
assimilated remains to be seen."

Tversky died from metastatic melanoma when he was 59. The
memorial resolution presented to the Faculty Senate noted: "Amos'
contributions to the social sciences, and to Stanford, were
monumental and will continue to make their influence felt for years
to come." The resolution singled out Tversky and Kahneman's
influence on economics as "likely to be most lasting and
profound."